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Look here!
[June 03, 2006]

Look here!

(Financial Mail Via Thomson Dialog NewsEdge)by Type search engine marketing into Google and the world's largest search engine takes a third of a second to deliver 65,7m results on the subject.

Marketing through search engines is one of the fastest-growing and most competitive businesses on the Internet, but most SA firms still don't realise how visible it can make them. Except one.

An online marketing company based in Cape Town is among the top five search engine marketers in the world and boasts clients like eBay and Travelocity. It was credited with helping its clients make US$50m from online sales in 2005; it plans to double this figure in 2006 and believes it can reach annual turnover of R1bn within the next three years. It's one of Google's biggest clients outside North America. The company is called incuBeta, and was founded by husband and wife team Vinny Lingham and Charlene Troskie three years ago. It specialises in making its clients' websites more prominent on the Internet, using the power of Internet search engines. IncuBeta uses a range of techniques and in-house software that push targeted Web traffic to client sites. These include paid advertising listings on the websites of major search engines, keyword-related advertising that improves the rank in organic listings (the free or unpaid listing that appears on a search results page) and the use of pay-per-click search tools.

IncuBeta's competitive edge is its impressive database of more than 30m keywords and an array of sophisticated software tools that practically guarantee clients visibility in a new medium that is growing exponentially. Without search engines like Google, MSN Search, Yahoo and Alta Vista, it would be virtually impossible to find anything on the Internet. The surface Web, that part of the Internet that is commonly accessed by up to 945m users, consists of about 17bn Web pages, and is growing at a rate of 7,3m pages a day. So unless you have mastered a few tricks of your own, your website will not be found online unless by design or good fortune. Each month these millions of users turn to search engines to find information about subjects as diverse as Jessica Simpson, cancer caused by asbestos, and life assurance. Many don't even bother using their bookmarks or favourites anymore they just Google it when they need to find something. They enter a few key words, click through a few search results, and hope to find what they are looking for in a few seconds.

It's easy to understand why, for webmasters, the most popular search engines are the most important places to be listed they have the potential to generate so much traffic.

The Internet is the most powerful marketing platform in the world, says Lingham. And search engines are revolutionising this arena. They allow clever marketers to transcend borders, currencies and time frames. People are on the Net because they are looking for something. So if they are looking for a product or service offered by one of my clients, it's my job to help them find it. This was the opportunity that Lingham spotted while working for an Internet casino marketing agency. The agency wasn't interested in pursuing this business itself, so he left to start out on his own with the agency as one of his first clients. To understand how clever incuBeta's software is, it is necessary to understand a little about the workings of search engines. Today most search engines find and index relevant Web pages using Web programs called crawlers, spiders or bots. These spiders browse the Internet in a methodical, automated manner. Mostly they create a copy of all the visited pages for the search engine to process later. The search engine then indexes the copies so it can find what it needs quickly. Because of the size of the Web, the spider can download only a fraction of the Web pages within a given time, so it needs to prioritise its downloads. In addition, the speed at which information changes on the Web means that a spider must carefully choose at each step which pages to visit next. So it needs to be told how to rank things in order of importance, using a mathematical formula. The importance of a page is a function of its intrinsic quality, its popularity in terms of links or visits, and even of its Internet address. For instance, though the Google spider was built to index every significant word on a page, some spiders will keep track of the words in the title, subheadings and links, along with the 100 most frequently used words on the page and each word in the first 20 lines of text. Others go in the other direction, indexing every single word on a page, including a, an, the and other insignificant words. Whichever approach one chooses, the point is that these software robots are driven by complex algorithms which the search engines keep to themselves.

Lingham's skill lies in what he calls an intuitive ability to decipher these algorithms and so to understand how the world's largest search engines rank sites in order of importance.

It sounds a bit dodgy, but it's not. We haven't hacked into anything. We simply understand what the search engines are doing and we have used that understanding to build better systems and processes. We have an excellent relationship with Google, given our status, and this means that we get access to new features and technology way ahead of others in the market. IncuBeta devotes a huge amount of energy to building and maintaining its database of the most valuable search terms on the Internet. The way keywords work, according to an article in BusinessWeek, is that companies bid to place their ads alongside keywords relevant to their products. A travel agent, say, might bid on Caribbean cruise and airline tickets. But many advertisers have found such generic keywords to be pricey and less likely to cover the cost of the ad. Instead, they are bidding on a larger array of more specific keywords: a telecom company might choose wireless plan rather than cellphone in an effort to lure the most interested buyers. Every word has an intrinsic value because it reflects a certain desire or intent of the user, explains actuary Michael Leeman, one of the newest shareholders in incuBeta. We need to work out more accurately than anyone what the value of a particular word or phrase is. Every word has a profit margin and some have more margin than others. We have the insights and the technology to automatically value and rebid on all 30m of our words. What makes keywords important is the fact that even though the search engines charge fees for listings and clicks, your ranking is not guaranteed. IncuBeta's technology helps engineer better positions and traffic, which ultimately lead to more revenue for the client.

The software that does this was conceptualised by Lingham and his staff of 50 people, including campaign managers and software engineers. But he has a unique way of doing things, which is unfathomable to most people. So Leeman's contribution among many is to apply some academic rigour to the processes that were developed intuitively by Lingham. Lingham is a mathematical genius who didn't finish school with any distinctions and who failed statistics at university. Yet he won the regional Maths Olympiad in grade 11 and was the regional chess champion in grade 12. At 16 he joined Mensa and was found to have the second-highest measured visual processing skills in the world in an independent study.

What this means is that though he is not winning prizes for academic application, he is brilliant at solving problems.

So why have few people in SA ever heard of him? SA companies do not recognise or understand the potential of the Internet. As a result our company is invisible locally, yet it has a high profile internationally. He is scathing about local websites, which he says are developed by traditional and expensive marketers with no concept of how the Internet environment works. The flash technology and rich graphics make the sites difficult for users to download and impossible for search engines to find. Europcar is incuBeta's sole local client and according to Lingham it has had a sixfold increase in online revenue since it began its online campaign 12 months ago. Online bookings have increased from R200000 to R2m over the past year, without affecting sales from Europcar's other channels. IncuBeta receives a share of the consumer spend brought to clients via the Internet sales generated as a result of its efforts. So if we are not successful, we don't get paid, explains IncuBeta cofounder Charlene Troskie, who is responsible for researching and testing new campaigns and new markets. The company has obviously been delivering results it has been profitable since its first month of operation. But, like all start-up businesses, it has had its ups and downs. After four months we knew we were onto something big we had grown so quickly. The flip side was that at the same time they ran out of money. We had to pay the search engines up front, but our customers paid us only 52 days later, Troskie recalls.

They did what entrepreneurs seem to do naturally. Lingham sold his house; they used their credit cards to the limit; they took out personal loans including R50000 from a loan shark. At the same time Troskie took a chance and quit her job to work full-time in the business. But relief came in the form of two friends who bought into the business and introduced Lingham to an angel investor. This investor was recently bought out by a consortium consisting of TEIM Ventures, a venture capital firm based in Johannesburg; Southern Cross Capital, the VC firm funded by the Oppenheimers; and two individuals, Leeman and Lance Katz. Aside from the usual business challenges, launching a business together has had its difficulties for Lingham and Troskie who, perhaps unsurprisingly, met through an online dating service in 2000 and were married last year. They have not managed to keep work out of their home life and now make no effort to do so. The Internet is the type of environment where one missed opportunity could be the last opportunity you get we can't take our eye off it and I think we recognise that this is just a particular time in our lives, says Troskie. Managing the inevitable office politics is done carefully, but she does concede that being married to a man who sleeps less than five hours a night, who sits online until 2am dealing with the US west coast, who is an extrovert with more than 2000 names in his contact database, who travels overseas regularly to speak at conferences or sign up new clients and whose online blog, www.vinny, gets 20000 hits a month is not always easy. There have been times when I've felt more like a business partner than a wife, she says. Having survived at least one growth spurt which nearly unseated the company because it didn't have the people or the processes to handle the extra business, Lingham is now ready to take incuBeta to the next phase of its life. We are the fourth- or fifth-largest search company in the world by both revenue and staff, but we still have less than 1% of the market share. This is a fragmented market which must consolidate." Lingham plans to benefit from this. We are looking to acquire other companies, either for their client lists or access to new markets or new customers, or even perhaps for their technology. Leeman agrees that the time is right. This is a numbers game we've got the right data, the right algorithms and the right margins it's not rocket science. This is a beautiful business and we are just at the beginning."

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